The SWAT2 demo is packaged in a self extracting archive. The actual installer is a 32-bit installer that works just fine on Win7 x64. All that my SWAT2 Demo installer is is a replacement for the self extractor. The installer itself is the original Sierra installer. I have not really played the demo through, but it starts up without issue, complete with sound and music on my Win7 Pro x64.
Copying an installation from one machine to another since the Win32 days often does not work a the games often require changes to the system that do not get copied over with the game's folder. Any codecs required for the in game movies would not get installed. Moving an installation from one machine to another can be done, but it requires back engineering the installer with some kind of tracker to monitor these system changes/additions. I have done this a number of times to make a 32bit replacement installer for a 32bit game that shipped with a 16bit installer, of which there were plenty. This was the fault of the game packagers, not Microsoft.
As to the incompatibility of 16bit code on x64 Windows, blame AMD's design of the 64bit extension of x86. Microsoft cannot make the hardware do something that it was not designed to do. Besides, the only old software worth holding onto are games. You cannot hold back progress forever for just games. New hardware, new features, new capacities require changes and evolving APIs. This is what breaks backwards compatibility. Microsoft has done more for backwards compatibility that any other OS maker. Apple has made a clean break at least three times, leaving their customers in the lurch. Some times you just have to move on.
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